Changes in the composition of the Group and other transactions

In the 2017 financial year, Deutsche Telekom conducted the following transactions, which had an impact on the composition of the Group. Other changes to the composition of the Group not shown here were of no material significance for Deutsche Telekom’s consolidated financial statements.

Sale of Strato AG

In December 2016, Deutsche Telekom reached an agreement with United Internet AG on the sale of hosting service provider Strato AG. The sale is in line with the strategy of selling off or finding partners for business areas that cannot be developed adequately within the Deutsche Telekom Group and, in doing so, potentially increasing their value. The sale was completed at a purchase price of EUR 0.6 billion effective midnight March 31, 2017 after approval was given by the Federal Cartel Office (Bundeskartellamt). Income from divestitures of EUR 0.5 billion attributable to the sale was disclosed under other operating income.

Sale of DeTeMedien GmbH

On June 14, 2017, Deutsche Telekom completed the sale of all its shares in DeTeMedien GmbH to a consortium of medium-sized publishers. By agreement, the purchase price remains confidential. It comprises a cash component as well as other elements, including a settlement of the dispute with the buyers, who for several years have pursued legal proceedings ­concerning the level of charges for subscriber data. In addition, the publishers have assumed the obligation to publish subscriber directories.

Sale of the shares in Scout24 AG

With accounting effect from June 23, 2017, Deutsche Telekom placed its entire direct stake of 9.26 percent in Scout24 AG in the market at a price of EUR 32.20 per share. The sale resulted in proceeds of EUR 0.3 billion and income from divestitures of EUR 0.2 billion attributable to the sale was disclosed under other operating income.

Voluntary presentation of the quantitative effects on the composition of the Group

Deutsche Telekom acquired and disposed of entities in the current and prior financial years. This imposes certain limits on the comparability of the consolidated financial statements and the disclosures under segment reporting.

The presented effects in the Group Development operating segment result from the acquisition of the fixed-network consumer business from Vodafone in the Netherlands as of December 16, 2016 and the aforementioned sale of Strato AG.

The following table shows the effect of changes in the composition of the Group on the consolidated income statement and segment reporting.

millions of €

2016

Total
2017

Total

Germany

United States

Europe

Systems Solutions

Group Develop-
ment

Group Head-
quarters & Group Services

Recon-
ciliation

Pro forma a

Organic
change
2017

Net revenue

74,947

73,095

(7)

(118)

72,970

1,977

Other operating income

3,819

4,180

(2)

(3)

4,175

(356)

Changes in inventories

21

(12)

0

0

(12)

33

Own capitalized costs

2,292

2,112

2

(1)

2,113

179

Goods and services purchased

(38,161)

(37,084)

(47)

96

(37,035)

(1,126)

Personnel costs

(15,504)

(16,463)

22

5

(16,436)

932

Other operating expenses

(3,444)

(3,284)

(13)

1

(3,296)

(148)

Depreciation, amortization and impairment losses

(14,586)

(13,380)

8

4

(13,368)

(1,218)

Profit (loss) from operations (EBIT)

9,383

9,164

0

0

0

0

(37)

(16)

0

9,111

273

Finance costs

(2,197)

(2,492)

0

0

(2,492)

295

Share of profit (loss) of associates and joint ventures accounted for using the equity method

76

(53)

0

0

(53)

129

Other financial income (expense)

(2,269)

(2,072)

0

0

(2,072)

(197)

Profit (loss) from financial activities

(4,390)

(4,617)

0

0

0

0

0

0

0

(4,617)

227

Profit (loss) before income taxes

4,994

4,547

0

0

0

0

(37)

(16)

0

4,494

500

Income taxes

558

(1,443)

0

0

(1,443)

2,001

Profit (loss)

5,551

3,104

0

0

0

0

(37)

(16)

0

3,051

2,501

a Based on the composition of the Group in the current reporting period.

The following transactions will change the composition of the Deutsche Telekom Group in future.

Agreed acquisition of Layer3 TV Inc. On November 9, 2017, T-Mobile US signed an agreement to acquire 100 ­percent of the shares in online TV provider Layer3 TV, Inc. The agreement includes a cash purchase price of around USD 325 million. The transaction was completed on January 22, 2018. T-Mobile US expects the acquisition to further strengthen its TV and video portfolio and its plans include ­rolling out its own TV service in 2018. The purchase price allocation and the measurement of the assets and liabilities have not yet been concluded.

Agreed acquisition of Tele2 Netherlands Holding N.V. On December 15, 2017, Deutsche Telekom signed an agreement with the Tele2 Group on the acquisition of telecommunications provider Tele2 ­Netherlands Holding N.V. by T-Mobile Netherlands. This transaction is part of the long-term strategy and will establish a stronger, more sustainable ­provider of convergent fixed-network and mobile services on the Dutch market. Tele2 Group receives a purchase price in the form of a 25.0 percent stake in T-Mobile Netherlands and a cash component of EUR 190 million. The transaction is expected to be closed in the second half of 2018, ­following approval by the responsible antitrust authority.

Agreed acquisition of UPC Austria GmbH On December 22, 2017, T-Mobile Austria Holding GmbH agreed to acquire Austria’s leading cable operator, UPC Austria GmbH, from Liberty Global Holdco 2 B.V. The agreed cash purchase price is around EUR 1.9 billion less net debt. In line with the strategy, this acquisition will allow Deutsche Telekom to offer convergent product bundles to its customers on the European market. The transaction is expected to be closed in the second half of 2018, following approval by the responsible antitrust authorities and the city of Vienna.